As the cosmetic industry takes a hit during the pandemic, Ulta Beauty finds a bright spot in lashes, brows, eye makeup, and non-prestige brands

As the cosmetic industry takes a hit during the pandemic, Ulta Beauty finds a bright spot in lashes, brows, eye makeup, and non-prestige brands
Ulta Beauty reported online sales tripled year-over-year in the second quarter of 2020.Don & Melinda Crawford/Education Images/Universal Images Group via Getty Images
  • Ulta Beauty beat Wall Street expectations in the second quarter of 2020, despite sales slumps across the cosmetic industry as a result of the pandemic.
  • According to Ulta CEO Mary Dillon, the company saw particular growth in its lash, brow, and eye categories, as consumers got creative with makeup above their masks. Ulta also saw a boom in salon services at reopened stores in the second half of the quarter.
  • "Longer-term, we're confident beauty will recover and thrive given the strong emotional connection consumers have with the category," Dillon said on the call with investors.

As cosmetic giants like Estee Lauder and Coty falter during the pandemic, Ulta Beauty has managed to beat Wall Street expectations — in part thanks to a boom in lash, brow, and eye makeup products.

Though sales dropped 26% in the second quarter as a result of temporary store closures, Ulta reported significant gains in e-commerce, with tripled online sales year-over-year and success in curbside pickup. According to Ulta CEO Mary Dillon, the company was also buoyed by high demand for salon services such as hair color and texture once its fleet of more than 1,000 stores across the country was able to safely reopen to the public in the latter half of the quarter.

"The makeup category continues to be challenged due to shifts in consumer behavior and limited newness and innovation in the categories," Dillon said on a call with investors on Thursday. "Even with these headwinds, some subcategories of makeup performed better than others, including lashes, brow, and eye."
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Additionally, Dillon said the company has worked to expand its virtual try-on capabilities in these high demand categories, adding new digital features that "include hair color, false lashes, and the Benefit Brow bar."

The growth in eye product categories mirrors larger consumer trends, as masks and stay-at-home policies alter the way Americans use makeup. While sales of lipstick have plummeted across the industry — challenging Estee Lauder's "lipstick index" theory that claims that lipstick sales tend to soar during periods of economic recession — eye makeup sales were up 204%, according to Kantar data reported by the Telegraph.

Meanwhile, on social media, users have started sharing tutorials for creative eye makeup ideas to accompany a mask, and on TikTok there are more than 53 million views from videos tagged with #MaskMakeup.
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Ulta president Dave Kimbell said the company has also benefited from the disruption of the prestige beauty market, a shift that started before the pandemic as consumers turn to lower pricepoint items and alternative brands. Kimbell cited specific success in brands like Tarte, Urban Decay, Too Faced, and newer brands like Kylie Cosmetics.

Looking ahead, Dillon said she is confident that cosmetics and beauty will rebound as the pandemic continues, and that Ulta will maintain its momentum. "Longer-term, we're confident beauty will recover and thrive given the strong emotional connection consumers have with the category," Dillon said. "We know beauty enthusiasts remain passionate about beauty and Ulta Beauty, we see it through the engagement in our social channels. And while the connection with beauty has not diminished, how consumers engage with the category is changing."
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